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During the current year, Reed Consulting acquired long-term available-for-sale debt securities on July 1 at a...

During the current year, Reed Consulting acquired long-term available-for-sale debt securities on July 1 at a $86,000 cost. At its December 31 year-end, these securities had a fair value of $72,400. This is the first and only time the company purchased such securities. Required: 1. Prepare the July 1 entry to record the purchase of these debt securities. 2. Prepare the year-end adjusting entry related to these securities.

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Answer #1
General Journal Debit Credit
July 1 Long­ term debt investments—Available for Sale(AFS) 86000
          Cash 86000
Dec 31 Unrealized loss—Equity 13600 =86000-72400
        Fair value adjustment—Available­ for ­sale (LT) 13600
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